HSBC, ING banks announce first trade finance transaction using blockchain

HSBC, ING banks announce first trade finance transaction using blockchain

Last week, a shipment of soybeans was transported from Argentina to Malaysia via Cargill's Geneva and Singapore subsidiaries.

HSBC used the Corda blockchain platform, which it developed in partnership with a number of other banks such as ING, BNP Paris and State Street, with the technology side provided by consortium R3 and Finastra. The incentive? HSBC sees blockchain as a solution to help boost efficiency in the multi-trillion-dollar funding of worldwide trade.

The fact that the trade could be replicated if the same counterparties were involved made it an advance on previous trials using blockchain technology, according to Vivek Ramachandran, head of innovation and growth for commercial banking at HSBC.

The transaction took place in one step on a single platform in 24 hours, rather than the days or weeks required for numerous third parties to mediate the transaction, as has been the case up to now.

HSBC revealed that it concluded that blockchain is a commercially viable technology after processing a letter of credit on behalf of Cargill, a large food and agricultural conglomerate based in the U.S.

The LC was issued by HSBC, with ING acting as the advising bank. He pointed out that blockchain technology eliminates the need for paper reconciliation because all parties are on one platform and updates are handled instantly.

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ING has also been heavily involved in the trade-based developments on blockchain technology.

It's a lot less exciting than some of the other blockchain technologies we've been promised, which have ranged from decentralised currencies like Bitcoin to literal diamond exchanges, but it's probably the most sensible indication yet of the future direction of the technology.

"What that means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure".

According to the United Nations, digitizing all of the Asia-Pacific region's trade-related paperwork could slash the time it takes to export goods by up to 44%, cutting costs by up to 31% and boosting exports by as much as $257 billion a year.

R3 and the group of 12 banks supporting the Corda application are seeking to expand the network on an open basis to drive adoption across the industry.

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